1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly report under Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1998
/ / Transition report under Section 13 or 15 (d) of the Exchange Act
For the transition period from to
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Commission file number: 000-24167
EBS Building, L.L.C.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 43-1794872
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
c/o PricewaterhouseCoopers, LLP, 800 Market Street,
St. Louis, Missouri 63101-2695
(Address of Principal Executive Offices)
(314)206-8500
(Issuer's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrants filed all documents and reports required
to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes X No
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of September 30, 1998,
there were 9,466,938 Class A Membership Units outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
EBS BUILDING, L.L.C.
BALANCE SHEET
SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1998 DECEMBER 31, 1997
(UNAUDITED)
ASSETS
Rental property $ 19,690,818 $ 19,584,653
Cash 4,941 403,919
Rents receivable 47,088 7,465
Due from Edison Brothers Stores, Inc. - 61,398
Prepaid expenses 33,622 61,040
Capitalized lease commissions 872,384 -
Capitalized lease restructuring costs 876,232
Other assets 402 -
------------------ -----------------
Total assets $ 21,525,487 $ 20,118,475
================== =================
LIABILITIES
Accounts payable $ 26,483 $ 63,418
Accrued professional fees 96,661 139,297
Accrued utilities 95,766 72,644
Accrued salaries 10,157 45,777
Accrued property taxes 312,094 -
Accrued lease commissions 760,305 -
Due to Edison Brothers Stores, Inc. - 112,022
Note Payable 1,172,000 -
Other liabilities 6,559 12,495
------------------ -----------------
Total liabilities 2,480,025 445,653
------------------ -----------------
MEMBERS' EQUITY:
Membership Units (Class A - 10,000,000 authorized, 9,466,938 and 9,058,041
issued and outstanding at September 30, 1998 and December 31, 1997,
respectively; Class B - 533,062 and 941,959 authorized, issued and
outstanding at September 30, 1998 and December 31, 1997, respectively) - -
Paid-in capital 19,810,522 19,810,522
Retained earnings (765,060) (137,700)
------------------ -----------------
Total members' equity 19,045,462 19,672,822
------------------ -----------------
Total liabilities and members' equity $ 21,525,487 $ 20,118,475
================== =================
The accompanying notes are an integral part of these financial statements.
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EBS BUILDING, L.L.C.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------------------------------------------
FOR THE 3 MONTHS ENDED FOR THE 9 MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
(UNAUDITED) (UNAUDITED)
Income:
Rent $ 873,340 $ 2,566,738
Other 27,003 85,303
------------------ -----------------
Total income 900,343 2,652,041
------------------ -----------------
Expenses:
Maintenance 264,384 903,591
Professional fees 161,897 614,218
Utilities 218,315 569,570
General and administrative 130,303 339,215
Depreciation & amortization 165,599 411,928
Property taxes 104,031 312,296
Other operating expenses 44,879 128,583
------------------ -----------------
Total expenses 1,089,408 3,279,401
------------------ -----------------
Net loss $ (189,065) $ (627,360)
================== =================
Net loss per Class A Unit - primary $ (0.02) $ (0.07)
Net loss per Class A Unit - fully diluted $ (0.02) $ (0.06)
The accompanying notes are an integral part of these financial statements.
4
EBS BUILDING, L.L.C.
STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
MEMBERSHIP MEMBERSHIP PAID IN RETAINED
UNITS UNITS CAPITAL EARNINGS TOTAL
Balance, December 31, 1997 9,058,041 941,959 $ 19,810,522 $ (137,700) $ 19,672,822
Units transferred (unaudited) 408,897 (408,897) - - -
Year to date loss (unaudited) - - - (627,360) (627,360)
------------ ------------- --------------- ------------ -------------
Balance, September 30, 1998 (unaudited) 9,466,938 533,062 $ 19,810,522 $ (765,060) $ 19,045,462
============ ============= =============== ============ =============
The accompanying notes are an integral part of these financial statements.
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EBS BUILDING, L.L.C.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------------------------------------
FOR THE 3 MONTHS ENDED FOR THE 9 MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net loss $ (189,065) $ (627,360)
Reconciliation of net loss to cash flows
provided by operating activities:
Depreciation & amortization expense 165,599 411,928
Changes in operating assets and liabilities:
Increase in assets, excluding cash
rental property and capitalized lease costs (80,070) (70,232)
Increase in liabilities 812,332 981,395
---------------------- ----------------------
Cash flows provided by operating activities 708,796 695,731
---------------------- ----------------------
Cash flows from investing activities:
Lease commissions paid (760,305) (879,328)
Lease restructuring costs paid (912,742) (912,742)
Capital Expenditures (net) (37,387) (474,639)
---------------------- ----------------------
Cash flows provided by investing activities (1,710,434) (2,266,709)
---------------------- ---------------------
Cash flows from financing activities:
Net Draws on Line of Credit 1,002,000 1,172,000
---------------------- ----------------------
Cash flows (used) by financing activities 1,002,000 1,172,000
---------------------- ----------------------
Net increase/(decrease) in cash 362 (398,978)
Cash, beginning of period 4,579 403,919
---------------------- ----------------------
Cash, end of period $ 4,941 $ 4,941
====================== ======================
The accompanying notes are an integral part of these financial statements.
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EBS BUILDING, L.L.C.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
1. The accompanying unaudited financial statements, in the opinion of the
Manager, include all adjustments necessary for a fair presentation of
the results for the interim periods presented. These adjustments
consist of normal recurring accruals. The financial statements are
presented in accordance with the requirements of Form 10-QSB and
consequently do not include all the disclosures required by generally
accepted accounting principles. For further information, refer to the
financial statements and notes thereto for the period ended December
31, 1997 included in the Company's Registration Statement on Form 10-SB
filed on April 30, 1998
2. During February 1998 and June 1998, Edison Brothers Stores, Inc.
("Edison") exchanged an additional 280,560 and 128,616 Class B
Membership Units respectively, for an equal number of Class A
Membership Units of the Company and simultaneously distributed such
units to holders of Allowed General Unsecured Claims. In addition,
during the quarter ended September 30, 1998, 279 Class A Membership
Units were returned to Edison by holders of Allowed General Unsecured
Claims. Such Units were canceled and an equal number of Class B
Membership Units were simultaneously reissued to Edison. All
outstanding Class B Membership Units will eventually be canceled and an
equivalent number of Class A Membership Units issued to the holders of
Allowed General Unsecured Claims as required by the Members Agreement
and the Plan of Reorganization. At June 30, 1998, Edison held 532,783
Class B Membership Units.
3. The following table sets forth the computation of primary and fully
diluted earnings (loss) per unit for the periods ended:
For the For the
3 Months Ended 9 Months Ended
September 30, 1998 September 30, 1998
(unaudited) (unaudited)
Numerator:
Net Earnings/(Loss) - Primary and Diluted $ (189,065) $ (627,360)
================== ==================
Denominator:
Weighted Average Units Outstanding - Primary 9,467,126 9,359,050
Effect of Potentially Dilutive Units 532,874 640,950
------------------ ------------------
Units Outstanding - Diluted 10,000,000 10,000,000
================== ==================
Primary Earnings/(Loss) per Unit $ (0.02) (0.07)
================== ==================
Diluted Earnings/(Loss) per Unit $ (0.02) $ (0.06)
================== ==================
The weighted average units outstanding - basic was calculated on a
daily outstanding unit basis. The outstanding units - diluted was
calculated assuming that all of the Class B Units currently issued and
outstanding will eventually be converted into an equal number of Class
A Units.
4. Effective March 16, 1998, the Company entered into a $2,000,000
revolving line of credit with First Bank (the "Line of Credit"). The
Company presently intends to use the Line of Credit for working capital
needs and tenant improvements. Borrowings under the Line of Credit bear
interest at a rate per annum equal to the LIBOR rate plus 2.25%. There
was no commitment fee
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EBS BUILDING, L.L.C.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
for this Line of Credit. Payments due for borrowings on the Line of
Credit are for interest only until maturity (March 15, 1999), when all
outstanding principal and interest is due and payable. As of September
30, 1998, the Company had outstanding borrowings of $1,172,000 under
the Line of Credit.
5. On August 14, 1998, the Company entered into a five-year lease for
2,835 square feet of rentable office space, or approximately 1% of
total rentable space. This lease provides annual rent of less than
$10,000 and expires in September 2003.
On September 30, 1998, the Company entered into a new two-year lease
with Edison for 206,450 square feet of rentable office space, or
approximately 48% of total rentable space. The Edison lease provides
annual rent of $1,740,978 and expires in September 2000 with an option
to renew for one year at $12 per square foot or for seven years at
prevailing market rates. Edison previously occupied 273,068 square feet
of rentable office space, or approximately 63% of total rentable space.
In connection with the Edison lease, the Company incurred lease
restructuring costs of $912,742, which have been capitalized and will
be amortized over the term of the lease.
In addition, on September 30, 1998, the Company entered into a
twelve-year lease with Stifel Financial Corp. and Stifel, Nicolaus &
Company, Incorporated for in excess of 82,000 square feet of rentable
office space, or approximately 20% of total rentable space. The Stifel
lease provides annual rent ranging from $1,275,000 to $1,572,500 and
expires in December 2010 with two options to renew for five year terms
at prevailing market rates.
The accompanying notes are an integral part of these financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
During the forthcoming twelve months of operations, EBS Building,
L.L.C. (the "Company") intends to continue owning, managing, maintaining,
repairing, leasing, selling, hypothecating, mortgaging or otherwise dealing with
the building located at 501 North Broadway, St. Louis, Missouri (the
"Building").
On August 14, 1998, the Company entered into a five-year lease for
2,835 square feet of rentable office space, or approximately 1% of total
rentable space. This lease provides annual rent of less than $10,000 and expires
in September 2003.
On September 30, 1998, the Company entered into a new two-year lease
with Edison Brothers Stores, Inc. ("Edison") for 206,450 square feet of rentable
office space, or approximately 48% of total rentable space (the "New Edison
Lease"). The New Edison Lease provides annual rent of $1,740,978 and expires in
September 2000 with an option to renew for one year at $12 per square foot or
for seven years at prevailing market rates. This New Edison Lease replaced the
prior lease agreement between the Company and Edison under which Edison
occupied 273,068 square feet of rentable office space, or approximately 63% of
total rentable space. In connection with the New Edison Lease, the Company
incurred lease restructuring costs of $912,742, which have been capitalized and
will be amortized over the term of the New Edison Lease.
In addition, on September 30, 1998, the Company entered into a
twelve-year lease with Stifel Financial Corp. and Stifel, Nicolaus & Company,
Incorporated for not less than 82,000 square feet of rentable office space, or
approximately 20% of total rentable space. The Stifel lease provides annual rent
ranging from $1,275,000 to $1,572,500 and expires in December 2010 with two
options to renew for five year renewal terms at then prevailing market rental
rates. The lease commencement date is January 1, 1999. Pursuant to the Stifel
lease, the name of the Building has changed to "One Financial Plaza". In
addition, the Company incurred lease commission costs of approximately $760,000
and expects to incur tenant improvement costs of approximately $2,000,000 in
connection with the Stifel lease. Lease commissions have been capitalized and
will be amortized over the term of the Stifel lease. Tenant improvement costs
will be capitalized upon the completion of construction plans.
Based upon the addition of the aforementioned leases, the annual
average rental rate of all tenants, including Edison, is $12.00 per square foot.
The annual average rental rate of all tenants, excluding Edison, is $15.77 per
square foot. Upon commencement of each of these leases, the Building's total
occupancy will be approximately 83%.
Rental income remained relatively constant from the quarter ended June
30, 1998 to the quarter ended September 30, 1998. Total operating expenses
decreased 8% during the same period, primarily due to lower levels of
professional fees incurred during the third quarter as well as lower deferred
maintenance costs. During the nine months ended September 30, 1998, the Company
had a net decrease in cash of $398,978. This decline was caused primarily by
commissions paid to leasing agents, tenant improvement costs incurred related to
a tenant lease entered into on February 16, 1998, lease restructuring costs
related to the New Edison Lease as well as various corporate costs incurred
associated with the registration of the Class A Membership Units under
9
the Securities Exchange Act of 1934, as amended.
In March 1998, the Company entered into a $2,000,000 revolving line of
credit with First Bank (the "Line of Credit") to cover any shortfalls in cash
flows. As of September 30, 1998, the Company had $1,172,000 of outstanding
borrowings under its Line of Credit. Management anticipates either increasing
the Company's availability under the Line of Credit or entering into an
additional revolving line of credit to fund the Company's present and
anticipated financing needs related to tenant improvement costs and lease
commissions on new leasing arrangements.
Year 2000 Compliance
The Company, through its property manager, Insignia Commercial Group,
Inc. (the "Property Manager"), utilizes computer software for its corporate and
real property accounting records and to prepare its financial statements, as
well as for internal accounting purposes. The current principal accounting
system software is not Year 2000 compliant. The Property Manager has informed
the Company that plans are being made to update the accounting systems during
1999. The cost of such update will be borne by the Property Manager. However,
in the event that such systems should fail, as a contingency plan, the Company
could prepare all required accounting entries manually, without incurring
material additional operating expenses.
The Property Manager has also informed the Company that it has budgeted
funds for and plans to review the major date-sensitive non-information
technology systems (such as the elevators, heating, ventilating, air
conditioning and cooling ("HVAC") systems, locks, and other like systems) in the
Building in early 1999 to determine if such systems are materially Year 2000
compliant. The Property Manager plans to internally make such determinations.
The Company expects to incur an estimated $100,000 in costs associated
with upgrading the current systems. In the most reasonably likely worst case
scenario, the failure of the non-information technology systems in the Building
could lead tenants to withhold their rent payments, which could have a material
adverse effect on the Company's business, results of operations and financial
condition. However, the Company does not believe that the Year
2000 issue will pose significant problems to the Company's information
technology and non-information technology systems, or that resolution of any
potential problems with respect to such systems will have a material adverse
effect on the Company's financial condition or results of operations.
The Company has not endeavored to determine whether or not its tenants
are Year 2000 compliant. The most reasonably likely worst case scenario facing
the Company as a result of a failure of its tenants' (or their financial service
providers') computer systems would be such tenants' inability to pay rent on
time. Such delays in payment could have a material adverse effect on the
Company's financial condition or results of operations.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits (listed by numbers corresponding to the Exhibit Table of
Item 601 of Regulation S-B
3.1: Articles of Organization of the Issuer filed with the
Delaware Secretary of State on September 24, 1997
incorporated by reference to the Issuer's Registration
Statement on Form 10-SB filed on April 30, 1998, Exhibit
10
2.1.
3.2: Members Agreement of EBS Building, L.L.C. A Limited
Liability Company, dated as of September 26, 1997
incorporated by reference to the Issuer's Registration
Statement on Form 10-SB filed on April 30, 1998, Exhibit
2.2.
4: See the Members Agreement, referenced as Exhibit 3.2.
10.6: Lease by and among EBS Building, L.L.C., Stifel
Financial Corp. and Stifel, Nicolaus & Company,
Incorporated, dated September 30,1998.
10.7: Lease by and between EBS Building, L.L.C. and Edison
Brothers Stores, Inc., dated September 30, 1998.
10.8: Assignment of Lease by and between EBS Building, L.L.C.
and Edison Brothers Stores, Inc., dated September 30,
1998.
27: Financial Data Schedule.
(b) Reports on Form 8-K. The Issuer did not file any reports on Form
8-K during the quarter ended September 30, 1998.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
REGISTRANT:
EBS Building, L.L.C.
By: PricewaterhouseCoopers LLP, as Manager
By: /s/ Keith F. Cooper
-------------------------------
Keith F. Cooper, Partner
Date: November 13, 1998
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Exhibit Index
3.1: Articles of Organization of the Issuer filed with the
Delaware Secretary of State on September 24, 1997
incorporated by reference to the Issuer's Registration
Statement on Form 10-SB filed on April 30, 1998, Exhibit
2.1.
3.2: Members Agreement of EBS Building, L.L.C. A Limited
Liability Company, dated as of September 26, 1997
incorporated by reference to the Issuer's Registration
Statement on Form 10-SB filed on April 30, 1998, Exhibit
2.2.
4: See the Members Agreement, referenced as Exhibit 3.2.
10.6: Lease by and among EBS Building, L.L.C., Stifel
Financial Corp. and Stifel, Nicolaus & Company,
Incorporated, dated September 30, 1998.
10.7: Lease by and between EBS Building, L.L.C. and Edison
Brothers Stores, Inc., dated September 30, 1998.
10.8: Assignment of Lease by and between EBS Building, L.L.C.
and Edison Brothers Stores, Inc., dated September 30,
1998.
27: Financial Data Schedule.